I had the same problem and called Avid tech support. The tech support person said that the Z1U was not a certified deck. The message you got means that it will not recognize the deck/camcorder’s timecode because it is not really SMPTE timecode. You have to disable the machine control by x’ing out the vtr icon and rolling the deck yourself in the capture tool, then you get time of day timecode associated with you downconverted footage. I think by October 15th, if you have an Avid support package, the next version should support HDV and take care of your problem. We also have Xpress Pro HD and it now supports the Z1U with machine control and timecode support.